The Trump administration's decision to impose tariffs on aluminum and steel imports has drawn warnings from businesses and USA trading partners that the measure could backfire, provoking a trade war without resolving the problems it's meant to address. "We can not allow this to happen as it has for many years!" It's a fraction of what it once was.
If Trump wants to help the steel and aluminum industries, there are better ways to do it.
Still, despite steel's political advantages, tariffs are still a large gamble for Trump. The construction industry would take the biggest hit. Trump's focus on steel (and aluminum) is hardly casual. He wants to make access to USA markets contingent on foreigners' playing by the rules (e.g., paying full price for the research costs of our technologies). Certainly our farmers, our technology and pharmaceutical companies and our industrial blue-collar workers would applaud that. But the consensus view is that the biggest cause has been technological advances. S. free trade deal of 1988, this country has concentrated on integrating itself seamlessly into the American economy.
So how many of these jobs were squeezed out by foreign imports?
For the bad, the many metal product manufactures creating things from imported steel and aluminum will be paying higher prices for raw material.
Brazil has said it will seek exemption from the newly imposed tariffs. The European Union counters that the USA move is more about protecting US companies, not national security. The steel sector, for example, supported as many as 650,000 American workers in the 1950s, yet now employs only about 140,000. In Oregon, many jobs have moved from labor and industry to service and tourism, which is fueling our homeless crisis: A person can only work so many low-wage jobs and costs have skyrocketed throughout the "economic boom" of the past few decades.
A European Commission spokesman said Trump was "cherry-picking" particular tariffs to highlight differences, and maintained that average tariffs were very similar on each side of the Atlantic at about 3.0 percent for products into Europe and 2.4 percent into the United States. As the chart below shows, that's well below the peak 137 million tons of steel produced in 1973.
Consider the consequences of higher steel duties in the US. Qualcomm shares tanked, and analysts raised concerns that other attempts by foreign companies to buy US technology companies could meet the same fate.
Experts we spoke to said it's important to look at these numbers in context. That tax will be paid by every person who buys the now-more-expensive product.
Beijing's goal is to make its industry more efficient and profitable, not just smaller.
One method, known as primary production, involves producing aluminum from raw materials. So, the U.S. should do the right thing rather than resort to trade war. That was on top of a 1.2 per cent increase in 2016 and more than seven times Japan's output.
"The recycling part is interesting in that it makes the point of declining need to worry about imports", said Michael J. Hicks, director of the Center for Business and Economic Research at Ball State University.
In the more immediate aftermath of the tariff announcement, reaction in the metals industry has been predictably divided along the US-Canadian border.
In the USA market, sales of Chinese steel have plunged because of earlier tariffs of up to 522 percent imposed on some products to offset what Washington says are improper subsidies to producers. Flipping through its history book, Vertical notes that during the time of the 2002 tariffs, U.S. Steel stock actually achieved its highest valuation (expressed in terms of enterprise value-to-earnings before interest, taxes, depreciation, and amortization, or EV/EBITDA) in the quarter before the tariffs were set in place.